Tax Provisions for Mineral Oil Exploration: Clause 54 of Income Tax Bill, 2025 vs. Section 42 of the Income Tax Act, 1961

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....ovisions aimed at modernizing the taxation framework in India. One of the significant inclusions is Clause 54, which pertains to the business of prospecting for mineral oils. This clause provides for deductions related to capital expenditure incurred in such businesses, thereby impacting the computation of income under the head "Profits and gains of business or profession." This article delves int....

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.... of business or profession." * Sub-section (2): Defines "specified oil exploration business" and sets conditions for agreements with the Central Government, including parliamentary oversight. * Sub-section (3): Details the types of deductions available, including expenses before commercial production and depletion of mineral oil. * Sub-section (4): Clarifies that deductions can be in lieu of....

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....llowances may also create complexities in tax computations. Moreover, the clause's reliance on agreements with the Central Government introduces a level of uncertainty, as the terms of such agreements may vary significantly. Practical Implications The implementation of Clause 54 will have significant implications for stakeholders in the oil exploration sector. Companies will need to navigate....

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.... depletion of mineral oil, whereas Section 42 focuses on exploration expenses. * Parliamentary Oversight: Clause 54 mandates that agreements be laid before Parliament, adding a layer of transparency not present in Section 42. * Transfer Provisions: Clause 54 provides detailed rules for the tax treatment of business transfers, including amalgamations and demergers, which are more comprehensive ....